Personal Finance

How to Afford Care for Aging Parents

The population is aging, with more people living longer. Some of them, however, will require some level of assistance as they get older, which can be costly. Here’s what you can do to prepare.

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Thanks to better health care and an improved diet, more Americans now live long enough to see their grandkids. On the downside, more adult children are struggling with the cost of caring for aging parents. Below, we’ll discuss some options and how much they can cost along with how to prepare for these expenses.

How Much Does It Cost to Care for an Elderly Parent?

The exact cost of caring for an elderly parent depends on various factors, including:

  • Your parent's health
  • If they live with you, alone, or in an elder care facility
  • Your parent's state of residence

According to howmuch.net, Alaska has the highest adult daycare costs at a little over $3,000 per month, while Alabama is the cheapest at $596 per month. Note that adult daycare is the most affordable senior care option in the U.S.

Besides being affordable, it lightens the burden on caregivers. Plus, it's a good fit for individuals who prefer having their parents live at home with them.

Nursing homes are the most expensive senior care option, costing an average of $24,000 per month in Alaska. Oklahoma has the lowest nursing home prices at $5,000 a month. Full-time home health care costs less than nursing homes but more than an assisted living facility.

The right option for your aged parent's care will depend on your financial situation and your parent's preferences. Let's take a closer look at your available options for senior care.

Senior Care Options for Your Parents

Assisted Living Facilities

If your parents can't live alone and need more care than you can provide, consider assisted living facilities. Besides private accommodations and feeding, the facility provides on-call staff who help with medication and housekeeping. Your parents will also be able to socialize with peers, which is essential for mental and physical wellness among the aged.

ALF Residents can have a shared or private room or apartment in this type of hands-on care facility. The levels of care these facilities provide will vary depending upon the resident's needs, and the prices usually correspond to the care level required.

The costs of assisted living facilities are covered by either private pay (out of pocket), Medicaid, or long-term-care insurance. According to Genworth’sCost of Care Survey 2018, the average cost of these facilities in the U.S. was $48,000 per year, with a range averaging between $2,000 and $6,000 per month.

Nursing Homes

Nursing homes offer all the benefits of an assisted living facility, plus 24/7 skilled nursing services. The round-the-clock care makes it ideal for seniors who require lots of medical assistance and other forms of care.

Depending on your budget, your parent can have a semi-private room or a fully private room. Semi-private rooms have an average annual cost of about $90,000 per year, while private rooms can cost as high as $100,000 annually, according to the same study mentioned above.

Visiting Nurses

These nurses administer care to parents who live alone or with their children. The nurse can visit at any time that best suits the patient, and it costs about $25 to $60 per hour. Fortunately, Medicare or Medicaid may cover the costs.

Home Health Care

Home health aides are helpers who provide at-home assistance and basic health services, including medication administration, injury dressing, and more. Note that a home care provider doesn't have to be a registered medical practitioner like a nurse, and many are Certified Nurse Assistants (CNAs).

When you contact a home health agency, be sure to find out what training its staff members have. According to Aging.com, the average cost of home health care in the United States is about $4000 per year, with a median hourly rate of around $20 per hour.

Respite Care Providers or Companion Services

These are similar to home health aides but do not provide any form of medical assistance. It’s a reasonably priced choice for healthy seniors who need help preparing meals, cleaning up, and performing other chores. It costs roughly the same as home health care if you use a service rather than hiring an individual directly, which can be cheaper.

Continuing Care Retirement Communities

Continuing Care is a luxury elderly care option that costs between $100,000 and $1 million. Residents buy into these communities in exchange for care for the remainder of their lives. Residents also have to pay monthly maintenance fees, which can cost up to $5,000 per month.

Hospice Nursing Homes

These are either private-pay nursing facilities, non-profit organizations, or government-funded facilities (which may be either low-cost or free, depending upon the laws in each state). In general, hospices are for residents who need palliative end-of-life care.

How to Afford Care for Aging Parents With the Help of Insurance

Several insurance options are available for reducing the costs of taking care of your aged parents. These options include:

Medicare (A U.S. Government Service)

Medicare can cover the cost of medical bills if your parents are over 65. The relevant parts of Medicare that will apply to your parents are:

  • Medicare Part A: Covers part of the cost of inpatient care in a hospital, home health care facility, or hospice.
  • Medicare Part B: Part B covers part of the cost of receiving services from healthcare providers, such as doctors and home or outpatient care providers. It will also help you save money on purchasing medical equipment and paying for preventive services.
  • Medicare Part C (Medicare Advantage): Covers the cost of prescription drug supplies for your parents. Medicare Advantage also covers many of the medical services covered under Medicare Parts A and B.

Medicaid

If your parents can’t afford health care due to their limited income, they may qualify for Medicaid. Qualifications for Medicaid vary between states, and some people qualify for both Medicare and Medicaid.

Medicaid coverage also varies between states, but it typically covers health services and reduces enrollee out-of-pocket costs. Medicaid-covered people can access personal care and other services that Medicare does not cover.

Policygenius is an excellent option to look for health insurance options. They act as an intermediary to help you find the right health coverage. They also have an abundance of information on health insurance in general. Check out our Policygenius review to learn more.

Long-Term Care Insurance

While Medicare and Medicaid cover many of the health care services that aging people need, they don't cover everything. For more comprehensive health coverage, your parent would benefit from long-term care insurance. It is a private health insurance policy for the cost of treating chronic or long-term illnesses and other ailments associated with old age.

Unlike Medicare and Medicaid, long-term care insurance also covers in-home nursing care and nursing home expenses. However, it does not cover the cost of surgeries, prescription drugs, and doctor visits. That means you'll need Medicare, Medicaid, or some other type of health insurance alongside a long-term care insurance policy.

Note that long-term care insurance is pricey, especially if buying it after the policyholder crosses 50. For this reason, financial advisors recommend that younger adults purchase long-term care insurance while you can get low premiums since you may become ineligible if you wait past mid-life.

For example, a 55-year-old couple may pay about $2,500 a year, while couples in their 60s may have to pay premiums of over $3,000 a year. However, they may not be able to buy it at all if they have pre-existing health conditions. Regardless of the price, long-term care insurance is a worthwhile investment for ensuring that your parents receive quality care services as they age.

Life Insurance with a Long-Term-Care Rider

If your parents already have life insurance and their provider offers a long-term care rider, they can add it to their life policy. It's more cost-effective than buying a separate long-term-care insurance policy.

What is a long-term-care rider (LTC)?

An LTC is a life insurance policy add-on that lets you use part or all of your policy’s death benefit for long-term care expenses. The policy covers only qualified illnesses, such as heart attack, stroke, cancer, dementia, and chronic conditions that require long-term care.

Depending on your parent's long-term rider, they may be able to access up to $6000 monthly for long-term-care expenses. If your parents do not use their LTC benefits, their life insurance beneficiaries will receive the full death benefit. Using the rider benefits reduces the benefits from their life insurance dollar-for-dollar.

Quotacy may be a good option to explore long-term-care riders as they work with dozens of insurance providers to get you the best possible solution. Read our review of Quotacy for more information.

Hybrid Insurance Policy

A hybrid insurance policy is very similar to a long-term-care rider because it combines life insurance and long-term-care insurance under a single policy. Unlike an LTC, hybrid products focus more on long-term care coverage than death benefits.

Depending on the insurance company, a hybrid insurance policyholder can have a zero-day elimination period before receiving LTC benefits. Purchasing a hybrid insurance policy is also typically more straightforward. That's because hybrid providers rarely ask for lab work and other requirements you'd need to purchase an LTC policy.

Best Tips for Taking Care of Your Parents Without Losing All Your Savings

You are not alone when it comes to searching for how to afford care for aging parents. If your parents don't have loads of money saved up from their working years or a portfolio that earns them passive income, you need to take action. Here are some of the best tips from children like you who want the best for their aged parents.

Talk About Retirement With Your Parents Before They Retire

Talking to your parents about money isn’t easy, but it is necessary. Whatever happens, don’t give up on the conversation. Explain to your parents that you have raised the topic because you want them to enjoy their later years without worrying about money.

As we mentioned, it's better to have this conversation before your parents retire. That way, they can make provisions in their finances that cover health care and more post-retirement. Ask them if they already have medical insurance and verify that it covers their medical conditions, including possible hereditary diseases that might pop up later.

If you feel their post-retirement plans for health and personal care are inadequate, suggest alternatives. Don't forget to explain how your suggestions can help them save money or add some other value to their lives.

Evaluate Their Retirement Income

If your parents have retired, ask about their retirement income. They might need a bit of convincing to provide this information, but if you show that your intentions are good, they should cooperate.

Offer to review their portfolios and pension information. You can also suggest safe investment or work-from-home opportunities if they need more income. Lastly, if they haven't applied for Social Security, help them file the necessary paperwork. Don't forget that the more financially independent your parents are, the happier they will be, and you will have fewer financial responsibilities.

Help Change Their Spending Habits

Not every parent has the foresight to cut unnecessary expenses and focus their income on essential comforts and long-term care. Be the voice of reason that shows your parents the unnecessary expenses they need to cut. You can also help your parents prioritize their spending on long-term care, medical bills, and unforeseen expenses.

Recommend Downsizing

Do your parents have a big house? According to Medicareful Living, maintaining all that space that no one uses can be financially and physically draining. Help your aged parents cut costs and put money in their pocket by recommending selling the big house and moving to a smaller house.

Your parents may shun this recommendation because of their emotional attachment to the property and other reasons. Persuade them by showing them their monthly expenses, how much they stand to gain by selling, and how much they'll save monthly by downsizing.

Alternately, your parents can rent out their current property and use that money to finance moving to a retirement community. In such long-term-care facilities, they'll have professionals taking care of their needs 24/7, and they'll get to socialize with peers as much as they want.

Plan for Long-Term Care

Many adults think that Medicare or Medicaid will cover their home care, nursing home, or other long-term care expenses. They won't. While not every aged parent will need long-term care, it doesn't hurt to have an LTC policy on standby.

Remember that if your parents don't have a policy for their health care and long-term care expenses, you will have to pay for it out of pocket, or what's called private pay. For most Americans, handling such financial responsibilities alongside personal expenses can be overwhelming.

Involve Family Members

You don't have to deal with planning your parents' retirement and convincing them to make changes on your own. If you have siblings or other close family members, ask them to join you in convincing your parents to make necessary changes.

If your family doesn't have the means to offer financial support, they can help in other ways, such as:

  • Taking care of your parents and their home
  • Helping your parents run errands
  • Escorting your elderly parents to medical appointments

Leverage Tax Breaks

Did you know that some elderly medical expenses are tax-deductible? If you are the primary care provider for your parents, you can also access tax breaks.

You cannot access these tax breaks if you cannot prove that your parents are your dependents or if you are not paying up to half of their living expenses. Besides tax breaks, don't forget to register your parents for government programs like Medicaid that cover several senior health care expenses.

Depending on the state in which you live, you might have access to waiver programs that reduce everyday senior care costs. Catherine Roper from Caring.com recommends using BenefitsCheckUp to find available programs in your state.

Teach Your Parents About Financial Scams

Incidents of financial scams targeting the elderly are on the rise. The elderly are vulnerable to such attacks because they are less technologically savvy. Some are also easier to persuade due to failing mental health.

Help your parents avoid phone, mail, and online scams by advising them about the red flags to avoid. Don't forget to warn them about the dangers of sharing their personal or banking details.

Consult a Retirement Expert or Financial Adviser

If you need help figuring out how to afford care for aging parents with your limited resources, talk to a professional. A retirement expert or financial adviser can help you formulate a retirement plan that best fits your parents' circumstances.

Meal Services

Save money on food with the help of local outreach programs. Check to see if you have any in your area that delivers hot meals to the elderly and other individuals who can't leave their homes. Some of these local outreach programs also offer meals prepared to suit the dietary needs of the elderly.

Don't Quit Your Day Job

Without your day job, you'll be reliant on the state and others to care for your parents. Try to find a way to keep your job and still care for your elderly parents. Besides providing you with an income, a job also comes with health insurance and other benefits. If you need more free time to care for your parents, consider working fewer hours instead of quitting your job.

Have a Retirement Plan for Yourself

Learn from caring for your parents and set up a retirement plan and long-term-care policy for yourself that will prevent burdening your own children. The earlier you start, the easier and less expensive it will be. Plus, savings and other assets put aside for your retirement will be far greater if you start early.

Final Thoughts

According to the U.S. Healthcare Cost Crisis, many seniors cannot afford care. Your parents don't have to become one of these seniors.

Avoid waiting until their retirement to start planning how to afford care for your aging parents. Talk to them about it years before they retire so they can purchase long-term care insurance and register for Medicare or Medicaid.

If the proper arrangements are in place, your parent’s long-term care won’t have to be a financial burden on you. Make the first moves today to ensure that your parents keep receiving the best care long after retirement.


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